Pensioners welcome fortnightly payment boost

About 750,000 pensioners will get a slight boost in payments from March, although some say the $6.80 increase per fortnight has taken too long to achieve.

The Government has reduced what are known as deeming rates, which determine the amount pensioners are assessed as earning on their financial investments or cash savings.

Pensioner Ken Windsor, from Dubbo in New South Wales, says the changes should have come in three years ago, but he says the increase will make a difference.

"It's definitely good news, but it's about three years too late," he said.

"I've got a lot of friends and people in organisations that I deal with where $6.80 a fortnight is going to be quite a considerable amount.

"The people who are right down on the pension line and living to their limit - $6.80 is going to put extra bread on the table, allow them to have coolers on or fans on in the hot weather and put a heater on in the cold weather," he said.

Any financial asset held by a pensioner earns interest at the deeming rate, instead of the actual rate of interest.

The Government then assesses that income to determine how much pension they are entitled to.

When the deeming rate is much lower than the actual rate of interest, a pensioner is able to keep the extra money.

But in recent years, the gap has narrowed as investment returns have struggled.

Mr Windsor says he has been left out of pocket.

"When I was earning 8 per cent, that was fine but now I'm only earning 5 or 4.5 per cent in some cases, because the interest rates have been brought down since 2010," he said.

The last time the deeming rate was changed was in June 2010.

Since then, there have been several cuts to interest rates by the Reserve Bank and in turn, cuts to the interest rates banks pay for deposits.

Community Services Minister Jenny Macklin says the Government has not been too slow to react.

"We keep a careful watch on the investments and their returns, so once we realised that we needed to change the deeming rates to reflect the returns that pensioners receive in banks, for example, then we changed the deeming rate," she said.